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High Court To Rule On School Board’s $1M Lawsuit

BERLIN – The ongoing
legal battle between the Worcester County Board of Education and a private
contractor hired to complete certain elements of the long-since completed Ocean
City Elementary School (OCES) appears to be heading toward end-game as the
state’s highest court last week agreed to hear the case.

The Maryland Court of
Appeals last week agreed to review the ongoing civil suit between the county’s
school board and Beka Industries, a private contractor hired to complete
certain elements of the site work for the construction of the new OCES back in
2004. At stake is the $1.1 million settlement awarded to the contractor by the
Worcester County Circuit Court in October 2008 that continues to accrue
interest at a rate of 10 percent per year while the case moves through the
appeals process.

The complex legal saga
began back in 2004 when the Board of Education hired Beka to do site work
during the construction of the new OCES. In August 2005, the school board
became unsatisfied with the pace of Beka’s work and replaced the company with
another contractor to finish certain components within the scope of the roughly
$1.8 million contract.

In October 2007, Beka
filed a breach of contract lawsuit against the school board seeking repayment
of the entire amount it estimated it was due for the work completed on OCES. In
October 2008, visiting Worcester County Circuit Court Judge Robert Karwacki
awarded Beka $1.1 million in the case, which the school board quickly appealed.

In February, the Court
of Special Appeals reversed the lower court’s decision, essentially agreeing
with several of the pillars of the school board’s appeal and remanded the case
back to Circuit Court. However, Beka attorney David Gilliss petitioned the
Court of Appeals to review the case and the state’s highest court last week
agreed to listen to the arguments from both sides.

The case has many
complex features, the most important of which is the interpretation of the
often-evoked doctrine of sovereign immunity, which protects governmental
agencies from lawsuits and big settlements in civil cases. Boiled down to its
simplest terms, the county school board is arguing it is protected by sovereign
immunity because it doesn’t have the means to generate revenue to pay judgments
in civil cases.

“Boards of Education are
unique entities in Maryland,” said Worcester Board of Education attorney James
Almand yesterday. “They are somewhat autonomous, but they can’t control their
own spending.”

Almand said he is
prepared to present the case to the state’s highest court and will continue to
argue in favor of sovereign immunity for Worcester’s school board and for
similar quasi-government agencies around the state.

“I’m not surprised the
Court of Appeals has agreed to review this case,” he said. “The sovereign
immunity issue at stake here is very important to Boards of Education
throughout Maryland. The decision of the Court of Special Appeals appears to
contradict a 2009 decision by the Court of Appeals on the same subject.”

Beka, meanwhile, is
arguing the school board, and all local government entities, are obliged to
honor binding contracts and are not protected by sovereign immunity. Beka
believes the school board breached its contract and a judgment in favor of the
governmental entity would set a precedent for similar breaches in the future.

“They have a moral
obligation to honor their binding contracts, and they’re trying not to do it in
this case,” said Gilliss this week. “This is hugely important, not just for my
client, but all private businesses that enter binding contracts with local
government entities.”

Gilliss said the
doctrine of sovereign immunity was never intended to allow local government
agencies to breach binding contracts at will and chastised the local school
board for continuing to avoid paying the $1.1 million judgment handed down by
the Circuit Court.

“Frankly, the one thing
that is so offensive about this is that the Board is acting like this is a
game,” he said. “They have a moral imperative to uphold their contracts and
they know it. It’s reprehensible. The citizens of Worcester County should be
outraged.”

However, Almand
countered Beka forced the issue with the breach of contract suit. He said there
was a mechanism in place in the original contract provided for settling issues
within the scope of the work Beka was hired to perform.

“There was a dispute
settlement mechanism built into the contract,” he said. “They could have met
with the architect to resolve their issues, but they didn’t seize the moment.
The idea that poor little Beka did all this work and didn’t get paid is a
little disingenuous.”

Almand said the fact the
Court of Appeals has agreed to review the case should not be taken as an
indication of which way the high court is leaning in the case.

“The fact the Court of
Appeals agreed to review the case is not any indication it disagrees with
anything the Court of Special Appeals decided,” he said. “The Court of Appeals
more often than not affirms the decisions of the Court of Special Appeals.”